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Tuesday, March 20, 2007 | Just days after receiving the city’s long-awaited 2003 audit, San Diego city officials continued grappling with the government’s auditing function Monday, with the City Council seeking to provide more input on how the watchdog role is carried out.
Council members’ desire to harness some authority over the internal auditing function comes in the second year of a five-year trial period that requires the internal auditor to both report to and scrutinize the Mayor’s Office. That dynamic, which has become one of the most oft-criticized facets of the strong-mayor form of government, prompted former Auditor & Comptroller John Torell to step down in January after a rocky year-long tenure under at Mayor Jerry Sanders’ supervision.
Control of the Auditor
Members of the council’s Audit Committee and the independent budget analyst are seeking more inclusion in the hiring of the Torell’s successor — even though city law allows the mayor to make that selection.
“Unless there is active participation throughout the whole process, I’m not sure where the balance is under a system of checks and balances,” Councilwoman Toni Atkins said.
Additionally, committee members and the IBA, Andrea Tevlin, criticized the audit office’s decision to shift employees who typically inspect the city’s inner workings — such as the accuracy of employee timecards and compliance with municipal contracts — to more heavily concentrate on the overdue outside audits. Tevlin also criticized the office’s emphasis on financial auditing, saying the agency should also be concerned with monitoring the performance of programs, services and departments.
When the strong-mayor structure was enacted last year, the Mayor’s Office was removed from the City Council and assumed everyday management of the city bureaucracy. With the change, the internal auditor — who reported directly to the council and not the city manager before strong mayor — was placed under Sanders’ purview. Municipal finance experts, such as the Association of Local Government Auditors, have criticized the relationship, arguing that auditors need to be separated from the management they are tasked with inspecting.
Sanders spokesman Fred Sainz noted that it will take another ballot initiative for the internal audit function to become completely severed from the mayor. “We’re all for an independent auditor and an independent comptroller, but that has to be approved by the voters,” he said.
Chief Financial Officer Jay Goldstone, who works for Sanders, recommended that the city follow the framework laid out by the Kroll Inc. consultants in the interim.
Under Kroll’s proposal, the city would separate the auditing and comptroller positions, so that the accountants charged with preparing the city’s books would continue working for the mayor, while a separate auditor general would inspect the bookkeeping. The council would be afforded the ability to consult on the selection of the auditor general, but its level of involvement is still vague, Goldstone said.
The Audit Committee said it wanted the council to be represented when the Mayor’s Office screens and interviews candidates for the job and asked the City Attorney’s Office for an opinion outlining its legal role in selecting an auditor. Goldstone said his office began soliciting applicants last week, and he expects to fill the position by late June, when the current fiscal year ends.
Some council members said they were concerned that there was no interim auditor and comptroller employed in the meantime, as the city tries to plow through the ongoing scrutiny of outside auditors. The city finally received KPMG’s certification of the 2003 audit last Friday, and auditors from Macias Gini & O’Connell told the Audit Committee on Tuesday they believe they can have the 2004 audit issued within the next 45 days. Completing all of the city’s outstanding audits by the end of 2007 is “doable,” said James Godsey, a partner for Macias Gini & O’Connell.
Receiving the blessing of outside auditors has been a high priority for city officials, as the city will continue to be barred from the public bond markets, where loans are cheaper, until outside firms bless the city’s financial statements. With KPMG’s certification last week, Goldstone estimated the city is on track to reach the public markets, where it can borrow for critical infrastructure projects, by the end of this summer.
But the emphasis on the outside audits has created a vacuum in a crucial part of the Auditor & Comptroller’s Office. Goldstone acknowledged Monday that the internal audit function — reviewing bills, city contracts and workers’ pay records — is suspended, although he said that some of those duties were being performed by some mayoral departments.
Tevlin, the council’s budget professional, cautioned the Mayor’s Office against putting too much emphasis on the issuance of the overdue outside audits and not enough on inspecting the performance of the city’s services and departments. She reported a survey her office conducted of other cities, where auditors spent an average of 68 percent of the time on performance audits and 31 percent on financial audits.
“While it is paramount that the City dedicates resources to issuing its financial statements, the City should focus of reestablishing an internal audit function as well,” Tevlin wrote in a report last week.
Councilman Tony Young called the suspension of the internal audit function “troubling.”
“Someone from your side of the aisle said take these employees and put them somewhere else,” Young said to Goldstone. “I don’t think that was a good decision.”
Goldstone underscored the timing of that decision, saying Torell chose to shift the staff to work on the outside audits several months ago, and that the council knew about the reorganization when Deputy Comptroller Greg Levin disclosed it last October.